Federal Reserve Minutes comparison — 29 October 2025 vs 28 January 2026
This Federal Reserve minutes comparison covers 29 October 2025 and 28 January 2026. Overall, the newer document was more hawkish. Overall, the current document shows a hawkish tilt relative to the prior, particularly on inflation and balance sheet, while rate path guidance remains neutral. The presence of two dovish dissents voting for a cut indicates internal division, but the majority's caution on inflation and labour market tightness suggests a higher bar for near-term easing.
What changed
More hawkish. Overall, the current document shows a hawkish tilt relative to the prior, particularly on inflation and balance sheet, while rate path guidance remains neutral. The presence of two dovish dissents voting for a cut indicates internal division, but the majority's caution on inflation and labour market tightness suggests a higher bar for near-term easing.
- Inflation — More hawkish. Prior dovish signal from declining inflation compensation is replaced by hawkish warnings that inflation remains well above target and progress may be slow, netting a hawkish shift.
- Labour Market — More hawkish. Prior document had no labour market signal; current highlights unemployment expected to fall below natural rate and caution that labour market risks to inflation dominate, a new hawkish signal.
- Rate Path — Little changed. Rate path signals are largely neutral in both documents, with current showing dissents favoring a cut but majority holding steady; no clear directional shift.
- Balance Sheet — More hawkish. Prior signaled a dovish recommendation to end SOMA runoff; current focuses on neutral liquidity expectations around tax date, removing the dovish tilt.
Key wording
Investors expected a 25 basis point lowering in the target range for the federal funds rate at the October meeting and another 25 basis point lowering at the December meeting, although some uncertainty around the December meeting was evident in responses to the Open Market Desk's Survey of Market Expectations (Desk survey) as well as in market prices.
He noted that excessive money market rate volatility would pose risks to both the control of the policy rate and the stability of funding in the repo market, which in turn could affect the stability of the U.S. Treasury market.
Inflation compensation moved lower over the period, particularly for shorter tenors, with staff models attributing these recent movements to temporary factors.
A couple of well-publicized bankruptcies, as well as some credit losses reported by some banks, led to increased investor scrutiny of credit markets, with investors reportedly closely tracking the riskiest segments of credit markets for signs of weakening and noting the possibility of future losses.
Market-based measures of policy rate expectations indicated one to two 25 basis point rate cuts this year, and the median modal path of the federal funds rate, as given in the Desk survey, continued to indicate expectations of two 25 basis point rate cuts this year.
Shorter-term Treasury yields were little changed, while longer-term yields rose a few basis points on net; the Treasury curve steepened slightly as a result.
Near-term inflation compensation continued to decline amid lower-than-expected consumer price index (CPI) readings, lower energy prices, and lower-than-anticipated pass-through of tariffs to customers; forward rates suggested that near-term inflation would stabilize close to current levels for the rest of the year.
The market-implied expected path of the federal funds rate, nominal Treasury yields, and swap-based measures of inflation compensation were little changed, on net, over the intermeeting period.
With RMPs continuing, reserves were expected to increase until early April before dropping quickly and sharply as tax revenues flow into the TGA.
Labor market conditions showed signs of stabilizing following a period of gradual cooling.
Official documents
Background reading
Related
Earlier meeting · Later meeting · Previous comparison · Next comparison · Methodology
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